IP Law Daily Appeal of ITC ruling for imported ATMs moot; character recognition infringement upheld
Monday, June 17, 2019

Appeal of ITC ruling for imported ATMs moot; character recognition infringement upheld

By George Basharis, J.D.

Appeal of ITC ruling of patent infringement was partially dismissed as moot because patent expired before appellate review.

The U.S. Court of Appeals for the Federal Circuit has dismissed as moot an appeal of an International Trade Commission (ITC) ruling that imported automated teller machines (ATMs) infringed on a domestic patent because the patent expired before the ruling could be reviewed on appeal. However, the court upheld a separate finding by the ITC that the imported ATMs infringed on a patented method for reading magnetic ink character recognition data on checks (Hyosung TNS Inc. v. ITC, June 17, 2019, Dyk, T.).

The ITC ruled that ATMs imported by Hyosung TNS Inc., Nautilus Hyosung America Inc., and HS Global, Inc., (collectively "Hyosung") infringed on U.S. Patent Nos. 6,082,616 (’616 patent) and 7,832,631 (’631 patent) that are owned by competing ATM manufacturer Diebold Nixdorf, Inc. and Diebold Self-Service Systems (collectively "Diebold"). The ITC also ruled that importation of the Hyosung ATMs satisfied the "domestic industry" requirement of 19 U.S.C. § 1337, which makes the importation of infringing goods unlawful.

The ’616 patent relates to a rollout tray that allows for the servicing of internal ATM components. Diebold filed a complaint against Hyosung claiming that the "service opening" of Hyosung ATMs, through which the imported machines are serviced, infringed on Diebold’s ’616 patent. Diebold’s ’631 patent relates to a method for reading magnetic ink character recognition data on checks, "regardless of a facing position of the check." In other words, a check could be read in any "up, down, forward, and backward position" even if the check is inserted upside-down.

’616 patent. After the ITC ruling, Hyosung redesigned the service openings of its ATMs, and a review by U.S. Customs found that the redesigned ATMs did not infringe on Diebold’s ’616 patent. The ruling allowed Hyosung to resume the importation of the redesigned ATMs. Hyosung then appealed the ITC ruling. However, the appeal was moot because the ’616 patent had already expired, and it did not appear that Hyosung violated the ITC exclusion order by importing infringing ATMs prior to the ruling by U.S. Customs. The court of appeals rejected Diebold’s argument that a ruling on the ITC decision would have collateral consequences on its pending district court infringement action against Hyosung because ITC determinations of patent infringement and validity do not have issue or claim preclusive effect even if affirmed on appeal, according to the court.

’631 patent. Hyosung argued that the ’631 patent was obvious and invalid because a person of skill in the art would have been motivated by a combination of two prior art references regarding magnetic ink character recognition to invent a reader that could read a check that was inserted upside down. However, the court rejected the argument because one of the inventions relied upon by Hyosung expressly provided that "all checks may be recognized ... unless the user inserts the checks upside down." The claim term "facing position" in the ’631 patent meant any position, including upside down. The claim therefore was not obvious by prior art.

The ITC determined that the economic prong of the domestic industry requirement under Section 1337 was satisfied by Diebold’s multi-million dollar investment in research and development from 2005 to 2010 to develop the magnetic reader asserted in the ’631 patent. Hyosung objected based on the passage of time between the development of the reader and Diebold’s complaint with the ITC. However, the court of appeals refused to adopt Hyosung’s bright-line rule to reject investment expenditures made five or more years before a complaint is filed. The ITC’s findings were based on ample evidence of substantial investment relating to the ’631 patent.

This case is No. 2017-2563.

Attorneys: Gregory G. Garre (Latham & Watkins LLP) for Hyosung TNS Inc., Nautilus Hyosung America, Inc. and HS Global, Inc. Sidney A. Rosenzweig for the ITC. Patrick Flinn (Alston & Bird LLP) for Diebold Nixdorf, Inc. and Diebold Self Service Systems.

Companies: Hyosung TNS Inc.; Nautilus Hyosung America, Inc.; HS Global, Inc.; Diebold Nixdorf, Inc.; Diebold Self Service Systems

MainStory: TopStory Patent FedCirNews

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